Book Review: Stay mad for life by Jim Cramer

I watch ‘Mad Money‘ once in a while and i remember the whole Bear Sterns fiasco and i watched the Today’s show when he was invited and that is probably all i knew about Jim Cramer. A little bit of googling showed he was the Cramer of ‘Kudlow and Cramer’ and that he is one of the most successful money manager of his time, earning his clients a juicy 24% return over 14 years [A warren buffet of 1987-2001]. And then this book kept calling from the shelves, so i had to check it out. Honestly, i really enjoyed reading the book and it boosted my confidence in Jim.

The Book is written with an understanding that you would like to manage every aspect of your financial life and are not just looking for stock picks, although there is no dearth of stock mentions throughout the book. The first few stock pick references in the book only made Jim look like someone who has made more mistakes than profits but that is one trait i look for in honest but talented guys [think Warren Buffett and Conoco philips for a second].

It was soothing to see someone who is all bells and whistles on the show making sure we pay off our credit cards first, not get into leverage to define our investments, make health and long-term disability insurance our must-haves and follow a budget in life. I was surprised to read that Cramer doesn’t like Sector-ETFs which, in my humble opinion, are great diversification tools but i can see where his reasonings come from [He favors index tracking as a way out of trouble more than sector-tracking especially in this international market we have access to these days] and i totally understand the guy.

The book explains stocks and bonds in detail and recommends buying bond-index funds over individual types of bonds. The authors recommend that we invest in a bond fund with low fees that invests in U.S. Treasurys. I was also very happy to see Cramer resonate with me over the benefits of Coverdell account vs 529 plans and how they complement each other [I dont think i have read any book that even mentions Coverdell. I have Coverdell for Akule where he is fully in stocks.] Jim identified six stocks for kids under six in this book with an explanation for why he thinks they would make great for kids. Teaching kids about stocks is something i have valued ever since i realized its importance and i would certainly make it an effort to see how far Akule goes with it.

Jim goes further in his analysis of funds and despises the target-date, fund of funds or life-cycle funds with high expense ratios and bad asset allocation [having too much bonds etc], to which i would like to say there are several great target-date funds or even funds of funds with low expense ratios and a better asset allocation but you have got to be very careful when you pick them [disclaimer : i am invested in TRRKX and VGSTX funds].

The book takes you into Jim’s picks for solid 5 years divided in growth sectors and then 20 stocks for the long horizon with careful explanation of why Jim likes them so much. The last chapter talks about Mutual funds and if we were to rely on money managers, who would they be and why, in Jim’s own opinion. I didn’t know any of the managers but i was impressed to read about them from Jim’s story.

Overall, a good book with a lot of experience into it.

My notes :

a) Buy a closed-end funds when they are trading at a discount lower then their net-asset value which happens frequently.